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Canadian Ownership and Control Determination Regulations, 1984 (SOR/84-431)

Regulations are current to 2024-05-28

PART VCanadian Ownership Rates of Insurance Companies (continued)

Determination of Canadian Ownership Rate of Life Insurance Company

 The Canadian ownership rate of a life insurance company that is a mutual company other than a mutual company referred to in section 38, 39 or 40 shall be considered to be equal to the proportion, expressed as a percentage rounded to the nearest whole number, that, as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province, its gross actuarial reserves maintained in respect of life insurance policies for policyholders in Canada represent of its gross actuarial reserves maintained in respect of all life insurance policies.

  •  (1) A life insurance company incorporated in Canada that is a stock company may elect to calculate its Canadian ownership rate in accordance with Part III or as the proportion

    1 - [(xp + n) / t]

    expressed as a percentage rounded to the nearest whole number, where

    • a) x is 100%, or if the maximum amount of profits earned in respect of life policies in Canada that are participating policies that may be allocated at the discretion of the directors of the company to shareholders is fixed by the company’s constating documents or governing statute, that maximum amount expressed as a percentage of the total profits earned by the insurance company in respect of its gross actuarial reserves for life policies in Canada that are participating policies;

    • b) p is the gross actuarial reserves for life policies in Canada that are participating policies;

    • c) n is the gross actuarial reserves for life policies in Canada that are non-participating policies; and

    • d) t is the gross actuarial reserves for life policies in Canada.

  • (2) For the purposes of subsection (1), p, n and t shall be determined as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province.

  •  (1) The Canadian ownership rate of a life insurance company that is a stock company incorporated outside Canada shall be considered to be the lesser of the Canadian ownership rate determined in accordance with Part III and the proportion

    1 - [(xp + n) / t]

    expressed as a percentage rounded to the nearest whole number, where

    • a) x is 100%, or if the maximum amount of profits earned in respect of life policies in Canada that are participating policies that may be allocated at the discretion of the directors of the company to shareholders is fixed by the company’s constating documents or governing statute, that maximum amount expressed as a percentage of the total profits earned by the insurance company in respect of its gross actuarial reserves for life policies in Canada that are participating policies;

    • b) p is the gross actuarial reserves for life policies in Canada that are participating policies;

    • c) n is the gross actuarial reserves for life policies in Canada that are non-participating policies; and

    • d) t is the gross actuarial reserves for life policies in Canada.

  • (2) For the purposes of subsection (1), p, n and t shall be determined as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province.

 Where a life insurance company can demonstrate to the satisfaction of the Minister that the determination of its Canadian ownership rate in accordance with this Part does not accurately reflect the beneficial interest in the company of its shareholders and policyholders in Canada, the Minister may adjust the Canadian ownership rate of the life insurance company to reflect the proportion of profits earned during the effective period of the relevant certificate that will be allocated to policyholders in Canada.

Canadian Ownership Rate of Property and Casualty Companies

 The Canadian ownership rate of a property and casualty company that is a mutual company incorporated in Canada shall be considered to be the proportion, expressed as a percentage, that, as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province, its gross actuarial reserves maintained in respect of property and casualty insurance policies for policyholders in Canada represent of its gross actuarial reserves maintained in respect of all property and casualty insurance policies.

 The Canadian ownership rate of a property and casualty insurance company that is a stock company incorporated in Canada shall be determined in accordance with Part III.

PART VICanadian Ownership Rates of Trusts

Interpretation

 In this Part,

beneficiary

beneficiary includes a person in whose favour or for whose benefit a discretionary power may be exercised; (bénéficiaire)

designated rate of interest

designated rate of interest means 12.3% per annum; (taux d’intérêt désigné)

discretionary interest

discretionary interest means any estate or interest in or possibility of receiving income or capital of a trust that is dependent on, or the value of which may be increased or reduced by the exercise of or the failure to exercise, a discretionary power held by the trustee or trustees or by any other person or persons and, for greater certainty and without limiting the generality of the foregoing, a power to amend the terms of a trust or a power to determine the date at which all or any interests shall vest or at which all or any property shall be distributed is a discretionary power; (droit discrétionnaire)

interest in expectancy

interest in expectancy means an estate or interest in remainder or reversion and any other future interest, whether vested or contingent, but does not include a discretionary interest; (droit en expectative)

interest in possession

interest in possession means an estate or interest other than an interest in expectancy but does not include a discretionary interest. (droit en possession)

Determining Beneficial Ownership of Classes of a Trust

 Subject to section 49, in determining the classes of formal equity and the beneficial Canadian ownership of a class of formal equity of a trust, other than a unit trust, the following rules apply:

  • (a) each of the following shall be a class of formal equity of the trust, consisting of 100 units:

    • (i) all interests in possession of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the income of the trust,

    • (ii) all interests in expectancy of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the income of the trust,

    • (iii) all interests in possession of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the capital of the trust,

    • (iv) all interests in expectancy of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the capital of the trust,

    • (v) all discretionary interests of beneficiaries with respect to all or any part of the income of the trust, and

    • (vi) all discretionary interests of beneficiaries with respect to all or any part of the capital of the trust;

  • (a.1) where a trust demonstrates to the Minister that the beneficial Canadian ownership of a class of formal equity of the trust does not accurately represent the beneficiaries’ interests in the capital or income of the trust, or any part thereof, the Minister may adjust the beneficial Canadian ownership accordingly;

  • (b) subject to paragraph (c), each beneficiary of the trust shall be deemed to own a number of units of a particular class referred to in paragraph (a) determined in accordance with the formula

    (Av/Tv) × 100,

    calculated to two decimal places where

    • (i) Av is the value of the interest of the beneficiary represented in that class, and

    • (ii) Tv is the value of all beneficial interests constituting that class;

    • c) subject to paragraph (d), the beneficial Canadian ownership of a class of formal equity that comprises discretionary interests in a trust shall be equal to the lowest Canadian ownership rate of any of the beneficiaries whose discretionary interests constitute that class determined as if the words “rounded to the nearest whole number” in section 16 read “rounded to the nearest 10th of a percentage point” and, for greater certainty, subject to paragraph (f), if such beneficiaries include a person that has or may have a Canadian ownership rate of nil, whether or not the identity of that person can be ascertained, the beneficial Canadian ownership of the class shall be deemed to be nil;

    • d) the Canadian ownership rate of a trust shall be determined without regard to the existence of any discretionary power to consume, advance, appropriate, encroach upon or otherwise dispose of all or part of the capital or income of a trust to or for the benefit of any one or more individuals who have interests in that capital or income independently of the existence of the discretionary power, if the exercise of that power is limited by a determinable standard relating to the health, education, maintenance, support or comfort of such individual or individuals;

    • e) any possibility that one or more persons will subsequently acquire interests in property of the trust at birth, on adoption or on marriage shall be disregarded;

    • f) for the purposes of paragraph (b), the value of any income right, annuity, term of years, life interest or other similar estate and of any interest in expectancy shall be determined,

      • (i) where the income right, annuity, term of years, or other similar estate or the interest in expectancy does not depend on a life contingency, on the basis of compound interest at the designated rate of interest with annual rests, and

      • (ii) where the income right, annuity, term of years, life interest or other similar estate or the interest in expectancy depends on a life contingency, on the basis of compound interest at the designated rate of interest with annual rests and the standard of mortality set out in Table I of Schedule II;

    • g) Tables II, III and IV of Schedule II shall be used as far as they may be applicable for the purpose of determining the value of any income right, annuity, term of years, life interest or other similar estate or interest in expectancy;

    • h) for the purposes of paragraphs (f) and (g), the annual income from any property shall be deemed to be the product of the designated rate of interest and the value of the property;

    • i) for the purposes of paragraph (b), where the value of any interest in a trust depends on the happening of a contingency other than a life contingency, the value of the interest shall be determined on the basis that the contingency will not occur, except that, if the Minister is satisfied that the contingency is substantially within the control of a person who is not dealing at arm’s length with a beneficiary of the trust, the value of the interest shall, if the Minister so directs, be determined as if the contingency had already occurred;

    • j) for the purposes of paragraph (b), where the value of any interest in the trust depends on the happening of a contingency that the Minister is satisfied cannot reasonably be expected to occur, the value of the interest shall be determined on the basis that the contingency will not occur;

    • k) for the purposes of paragraph (b), where the value of a particular interest in a trust depends on the death of a beneficiary before attaining such age, not exceeding 40 years, as is specified in the trust instrument, and the particular interest of the beneficiary is an interest in possession, the value of that particular interest and the value of any other interest determined with reference to the value of that particular interest shall be determined as if that beneficiary will attain the age specified in the trust instrument; and

    • l) where each of the beneficiaries in whose favour a discretionary power may be exercised has a Canadian ownership rate of 100%, the Canadian ownership rate of the trust may, if the trust so elects, be determined without regard to the existence of that discretionary power.

  • SOR/85-847, s. 16

Beneficial Canadian Ownership of Classes of Formal Equity of a Trust

  •  (1) If the beneficial Canadian ownership of a class of formal equity of an applicant or of an investor that controls the applicant in any manner that results in control in fact, whether directly through the ownership of units or indirectly through a trust, contract, the ownership of units of any other entity, or otherwise, or that is a member of a group that so controls the applicant cannot be determined for the purpose of paragraph 48(b) without reference to the designated rate of interest, the beneficial Canadian ownership of that class shall be the lowest Canadian ownership rate of any of the beneficiaries whose interests constitute that class determined as if the words “rounded to the nearest whole number” in section 16 read “rounded to the nearest 10th of a percentage point”.

  • (2) Subsection (1) does not apply to a trust that is an investor that would not have a direct or an indirect equity percentage in the applicant if all publicly traded classes of formal equity were disregarded in the measurement of direct or indirect equity percentage.

 Where a trust certifies that each of the beneficiaries that has an interest in a trust is a person that has a Canadian ownership rate of 100%, the trust shall be considered to have a Canadian ownership rate of 100%.

Transitional Provisions

  •  (1) Where a trust created before March 10, 1982 is an applicant or an investor and under the trust a discretionary power with respect to all or any part of the income or capital of the trust cannot be exercised in favour of any person other than

    • (a) one or more of the beneficiaries who have interests in that income or capital or in that part of the income or capital as the case may be, independently of the existence of the discretionary power,

    • (b) any individual related to any one or more of the beneficiaries referred to in paragraph (a), or

    • (c) a person obliged to make use of its interest in income or capital exclusively for charitable purposes,

    the trust may elect, in determining its Canadian ownership rate, that the existence of the discretionary power shall be disregarded in determining the Canadian ownership rate.

  • (2) Notwithstanding any other provision of these Regulations, where a trust created before March 10, 1982 is an applicant or investor and the Minister is satisfied that, in the circumstances and when considering the terms and conditions of the trust, the main purpose of the trust is to provide for the benefit of any one or more individuals related to any individual from whose contributions of property to the trust made prior to March 10, 1982 more than 25% of the value of the capital of the trust shall be determined as if all interests of the beneficiaries in the trust constituted one class of formal equity of the trust consisting of 100 units and as if all the units of that class of formal equity were owned by the beneficiaries, other than any beneficiary excluded by the Minister for the purposes of this subsection equally or in such unequal shares as the Minister considers appropriate having regard to previous distributions, if any, made under the trust.

  • (3) For the purposes of this section, where the terms of a trust have been amended or varied after March 9, 1982, regardless of whether such amendment or variation has been effected by virtue of a court order, an exercise of a power of amendment or variation conferred or reserved in the terms of the trust, an agreement of the beneficiaries or otherwise, the trust shall be deemed to have been created after March 9, 1982.

  • (4) Subsection (3) does not apply to a trust that was created before March 10, 1982 and that was amended or varied after March 9, 1982 or was resettled after March 9, 1982 where the sole effect of such amendment, variation or resettlement was to require, either expressly or otherwise, that any beneficiary or member of a class of beneficiaries have a Canadian ownership rate of 100%.

  • (5) For the purpose of this section,

    • (a) individuals are related to each other if each individual or the spouse of that individual is a lineal descendant, by birth or adoption, of a parent of an individual who is alive before a trust is created; and

    • (b) an individual is related to himself if that individual is a beneficiary of and a contributor of property to a trust.

 

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